By REUTERS
Malaysia is turning into the darling of Chinese developers as mainland investors turn their backs on market restrictions in Hong Kong and Singapore and bet billions on cheaper housing and higher returns in the Southeast Asian country.
State-backed Greenland Group announced this month a US$3.3 billion (RM10.8 billion) deal in two residential and hotel projects in Malaysia, joining smaller peers Country Garden Holdings Co Ltd, Guangzhou R&F Properties Co Ltd and Agile Property Holdings Ltd, which have invested a combined US$2.7 billion in Malaysia in the past two years.
In 2013, Chinese institutional and retail investors invested a total of US$1.9 billion into real estate in Malaysia, exceeding the US$867 million invested in Hong Kong and US$1.8 billion invested in Singapore, according to real estate consultancy Savills. The figure also topped the US$1 billion invested in Australia, but lagged investments from China into the UK and the United States.
“Malaysia hosts a vast Chinese community and has policies that attract foreign buyers so it has become a new investment destination,” said Greenland’s group chairman, Zhang Yuliang.
He added that Malaysia’s stable economic growth, large population demand in Johor Bahru, the city where the group is investing, its proximity to Malaysia’s major cities and Singapore, as well as the country’s established immigration policies, are reasons for the company to invest.
“Malaysia is the cheapest in the region in terms of capital city pricing,” said Tim Murphy, chief executive of property investment consultant and underwriter IP Global. “We like Malaysia also because of the strong foreign ownership level and because you can borrow money. Lenders are friendly.”
A 15% stamp duty on non-resident buyers in Hong Kong and Singapore, where cash-rich mainland Chinese have been blamed for driving up prices in the past few years, has deterred many foreign buyers, Murphy added.
Luxury residences in Malaysia sell for between US$2,300 and US$5,600 per square metre, much lower than US$27,600 to US$33,700 in Singapore and US$43,700 to US$53,500 in Hong Kong, according to real estate consultancy Knight Frank. Average rental yields are also more attractive in Malaysia at 4% to 6%, compared to 3% in Singapore and 2.5% in Hong Kong.
Mortgage terms are also better for non-residents in Malaysia, with buyers able to borrow 70% of a property’s value. That’s more generous than the 40% to 60% in Singapore and 30% to 50% in Hong Kong.
Officials with Country Garden declined to comment while officials with Agile and R&F could not be reached for comment.
One challenge facing Chinese developers is their ability to secure land, which is tightly controlled by local governments.
“It’s difficult to find good opportunities because the good plots of land are controlled by the local government. Only local developers, family of government officials and political affiliates can have access,” said an executive at a private equity fund who invests in Southeast Asian projects.
Property tours
Country Garden, which focuses on high-end residential housing, has three villa projects underway in Malaysia after it entered the market in early 2012. At its latest condominium project at Iskandar, five minutes from the Singapore border, the company sold more than 6,000 units within the first month, reaping a total of 9.1 billion yuan (RM4.9 billion).
Since the middle of last year, Country Garden has been organising subsidised tours to Malaysia for potential Chinese buyers, departing from Guangzhou, Hong Kong and Macau.
A four-day tour costs as little as 3,610 yuan, according to information on real estate agent website, house.163.com, with the property developer sponsoring 2,000 yuan for each person.
One morning is spent at Country Garden’s Danga Bay villa in Iskandar.
The web page, topped with a banner that says “300,000 yuan to get residency for the whole family in a city next to Singapore”, also gives details about Malaysia’s immigration policies.
Country Garden and Greenland Group’s overseas unit, Greenland Hong Kong, are due to post their 2013 full-year earnings on Wednesday.
— by Clare Jim
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